Stocks Drop as Risk Aversion Climbs Following North Korea’s Missile Launch

European stock markets are selling off amid a fresh rise in risk aversion following North Korea’s test missile that crossed over Japan and as tropical storm Harvey continues to cause havoc in the U.S. The DAX is underperforming with a 2% loss as the EUR rose above 1.20 against the dollar for the first time since 2015. The FTSE 100 is down and the Euro Stoxx 50 is well off so far as investors head for safety. Asian markets also closed in the red amid heightened geopolitical risks, but the sell-off deepened during the European session and the losses in Europe are much more pronounced than the -0.45% decline in the Nikkei or the -0.72% drop in the ASX 200. Indeed, European bourses are heading for the worst day this year so far, and U.S. stock futures are also firmly in negative territory.

French consumer spending rebounded in July and rose 0.7% month over month, after falling -0.7% month over month in June. This brought the annual rate to 2.1% year over year from 0.7% year over year, a further sign that consumption is continuing to underpin growth, although PMIs suggest manufacturing and exports are also making progress, which in turn is supporting the labor market and ultimately consumption, especially as inflation remains below the Eurozone average.

French Q2 GDP Rose

French Q2 GDP was confirmed at 0.5% quarter over quarter in line with the preliminary number and unchanged from Q1. The annual rate was revised slightly down to 1.7% year over year from 1.7% year over year, but this is still a clear improvement from the 1.1% year over year registered in the first quarter of the year. Export growth boosted growth and was up 2.5% quarter over quarter, against a mere 0.4% quarter over quarter rise in import growth. Private consumption growth accelerated to 0.3% quarter over quarter from 0.1% quarter over quarter, and while investment growth fell back compared to the first quarter, it remained robust at 0.7% quarter over quarter.

German GfK consumer confidence unexpectedly improved to 10.9 in the September projection, from 10.8 in August. The breakdown, which is only available for August, shows a renewed pick up in income expectations and the willingness to buy, even though economic expectations actually fell back markedly in August. The willingness to save meanwhile dropped with price expectations. Another very strong German confidence number that confirms that economic activity remains very strong over the summer quarter.